Agreement to Acquire Elmtree Gold Project in Northeast N.B . , $15 0,000 Bridge Financing , and M inimum $2.5 Million Concurrent Financing
AC/7620060.2
Avalon
Announces
Agreement to Acquire
Elmtree
Gold Project
in
Northeast N.B
.
,
$15
0,000
Bridge Financing
, and
M
inimum $2.5 Million
Concurrent Financing
Toronto
,
Ontario
--
(
November
2
6
, 2020)
–
Avalon
Works
Corp.
(
"
Avalon
" or
the "
Company
")
is pleased
to
announce that
it has entered into an agreement
(the "
Letter
Agreement
") dated
November 17
, 2020
among
Avalon,
and
Kevin Vienneau, Roy Bonnell, Nick Stajduhar and John Williamson,
who are
businessmen resident in Canada
(collectively, the "
Vendors
") for the
acquisition
(the
"
Acquisition
")
of
two mineral explo
ration properties respectively
comprised of 24 and 25
contiguous mineral claims
totalling
1,063,326
hectare
s
in
northeast
New Brunswick
known as the
"
Elmtree Gold Project
"
(the
"
Property
")
.
The Acquisition is anticipated to be completed by an amalgamation (the "
Amalgamation
") of a wholly
-
owned subsidiary of Avalon ("
Sub1
")
, which will acquire the Property,
with another wholly
-
owned
subsidiary of Avalon ("
Sub2
"), which will issue securities pursuant to Bridge Financing and Concurrent
Financing (as defined below). In consideration for the Amalgamation, the security holders (othe
r than
Avalon) of Sub1 and Sub2
will exchange their securities for like securities of Avalon on a 1
-
for
-
1 basis,
post
-
Consolidation
(as defined below)
, upon closing
(the "
Closing
")
of the Acquisition.
Pursuant to the Acquisition
and the application for listing on the TSX Venture Exchange (the "
TSXV
") as
contemplated therein
, the follow
ing steps will be necessary, subject to
the policies of the TSXV
:
(1) consolidation of all of the issued and outstanding securities of the Company
on the basis of
4.9362
-
to
-
1
(the "
Consolidation
")
;
(2) complet
ion of
a
non
-
brokered equity bridge financing (the "
Bridge Financing
") of
up to
$150,000
, to
be used in connection with the Acquisition subject to applicable policies of the TSXV, by way of a private
placement offering of special warrants (the "
Special Warrants
") of Sub2, a wholly
-
owned subsidiary of
Avalon,
which are
exercisable for no addit
ional consideration:
(i)
at any time, into units (the "
Bridge Units
") of the Company at a price of $0.375 per
Bridge Unit
, with each
Bridge Unit comprised, on a post
-
Consolidation Basis, of one
common share (each a "
Bridge Share
") and one
-
half common share pu
rchase warrant
(each whole warrant a "
Bridge Warrant
") of the Company; and each Bridge Warrant will
entitle the holder to acquire a common share (on a post
-
Consolidation basis) of the
Company at an exercise price of $0.75/common share for a period of 12 mo
nths from
the date of issuance;
or
(ii)
automatically upon
Closing prior to February 28, 2021, into Bridge Units of Sub2 at a
price of $0.375 per Bridge Unit, which Bridge Units shall be exchanged on Closing
pursuant to the Amalgamation on a 1
-
for
-
1 basis for like securities of the Company, on a
post
-
Consolidation
basis;
(3
) complet
ion of
a concurrent equity financing (the "
Concurrent Financing
") of a minimum of
$2,500,000
to a maximum of
$6,000,000
by way of a private placement offering of units (the "
Units
") of
Sub2
at a price of $0.50 per Unit, with each Unit c
omprised, on a post
-
Consolidation basis, of one
common share (each a "
Share
") and one common share purchase warrant (each a "
Warrant
") of
Sub2
;
and each such Warrant will entitle the h
older to acquire a Share of Sub2
at an exercise price of
$0.75/common sh
are for a period of 24 months from the date of issuance;
and the Units shall be
-
2
-
AC/7620060.2
exchanged on Closing pursuant to the Amalgamation on a 1
-
for
-
1 basis for like securities of the
Company, on a post
-
Consoli
dation basis;
(4)
the common shares of the Company ac
quired upon Closing by subscribers under the Bridge Financing
and Concurrent Financing shall not be subject to a four month hold or resale restrictions under
applicable securities laws, subject to the po
licies of the TSXV; and
(5) complet
ion of
the purchas
e and Acquisition
(the "
Property Acquisition
")
by the Company
of
the
Project
in consideration for p
ayment of a purchase price of $7,35
0,000 through (i) p
ayment of $3
50,000
cash to
Kevin Vienneau
;
(ii) the issuance of 14,000,000 common shares
(the "
Purchase Shares
")
of
a
wholly
-
owned
subsidiary of
the Company
, Sub1
;
which shall be exchanged on a 1
-
for
-
1 basis upon
Closing for 14,000,00 common shares of the Company on a post
-
consolidation basis afte
r giving effect to
a consolidation of all the issued and outstanding securities of the Company on the basis of at least
4.9362
-
to
-
1 at a deemed price of $0.50
per share; to Kevin Vienneau (2,400,000 Purchase
Shares) and
the other
three
(3)
Vendors (each 3,
866,666
Purchase Shares);
and (iii) grant of a 2% net smelter returns
royalty (the "
2% NSR
") on the Elmtree
Gold Project
to Kevin Vienneau
, all pursuant to the Letter
Agreement, and shall pay
a finder's fee (the "
Finder's Fees
")
to
an arm's length
third party finder (the
"
Finder
")
in the amount of
$100,000 by issuance of 2
00,000
common shares of Sub2 at a deemed price
of $0.50 per common share, which shall be exchanged upon Closing on a 1
-
to 1 basis for 200,000
common shares (the "
Finder's Shares
")
of the Company (on a post
-
Consolidation basis).
The
Property Acquisition,
Bridge Financing, Finder's Fees, and Concurrent Financing
(the "
Transaction
s
")
will be
subject to approval of the TSXV
in connection with the Company's application for listing on the
TSXV
.
The securities of the Company issued at Closing in connection with the Bridge Financing, Finder's
Fees, and Concurrent Financing will not be subject to resale restrictions, in accordance with applicable
securities laws
, subject to the policies of the TSXV
.
Upon completion of the
Property
Acquisition
, it is
intended that the post
-
Consolidation common shares of the Company will be listed and posted for
trading on the TSXV as a Tier 2 listed mining exploration issuer. The
Transaction
s are
expected to result
in a "reverse takeover"
of Avalon
under the policies of the TSXV.
The Consolidation was previously
approved by the
shareholders of the
Company
at a shareholders
meeting held on December 23, 2019
,
which is
subject to
appr
oval of the board of directors of the
Company and
TSXV approva
l
.
To address requirements of TSXV policies, the
Company
intends to obtain
approval for
creation of a new control person
by
way of written approval of
shareholders holding
over
50
% of the
issued and outstanding common shares in the capital of the Company.
In regards to
the
Transaction
s
, the Company
specifically
confirms that it will not be seeking shareholder
approval
under the policies of the TSXV
for the Transaction
s
as a reverse takeover
because
such
approval is not required under the policies of the TSXV where
: (i) the
Transaction does not consist of
"
Related Party Transactions
"
; (ii) the Company
is without active operations as it is not listed on any stock
exchange
; (iii) the Company is not and will not be subject to
a cease trade order and will not otherwise
be suspended from trading upon completion of the
Transaction
; and
(iv)
shareholder approval of the
Transaction
is not required
under applicable corporate or se
curities laws
.
The net proceeds of the
Bridge Financing
will be used to pay
Transaction
-
related
expenses of the
Company
.
The net proceeds of the Concurrent Financing will be used to fund exploration of the
Elmtree
Gold Project, and for working capital and general corporate purposes, as will be more specifically
described in
the Transaction disclosure document of the Company that will be used
to describe the
Transaction
s
and the
Elmtree
Gold Project in greater detai
l
, which will be publicly filed on SEDAR at
www.sedar.com
.
-
3
-
AC/7620060.2
The Transaction
s
are
subject to a number of conditions, which
among other conditions
include:
(a) completion of a
n initial
geological technical report
(the "
Initial Technical Report
")
in respect of
the
Elmtree
Gold Project
completed
in the name of
the Company
in accordance with National Instrument
43
-
101
—
Standards of Disclosure for Mineral Project
s ("
NI 43
-
101
") and filed under the Company's
profile on SEDAR;
(b)
completion and delivery to the Company of
written confirmation as to title to the Property
(the "
Title
Confirmation
")
co
nfirming 100% ownership of the Elmtree Gold Project by the Vendors
free and clear of
encumbrances
in a form satisfactory to legal counse
l for the Company, acting reasonably
;
(c) completion of satisfactory due diligence of the Company by
the Vendors
, and by the Company on the
Elmtree
Gold Project, prior to signing a definitive agreement
by
January 31, 2021
and in any event by no
later than
February 28, 2021
,
prior to closing the
Transaction
s
, which shall include all the customary
terms and conditions for the size and nature of
such a t
ransaction
reflecting the terms and conditions of
the
Letter
Agreement;
(
d
) no material adverse change shall
have occurred in the business or
financial
condition or affairs of
the
Company;
(
e
) the Company having no liabilities as at the date of
Closing
, other than reasonable costs and expenses
incurred in the ordinary course of business in connection with the
t
ransaction
s contemplated herein
, to
any other party, including shareholders, directors and officers of the Company;
(
f
) the representations and w
arranties of the parties to the
Letter
Agreement being true and correct in
all material respects as at the date of
Closing
;
(
g
) there being no material breach of the representations, warranties and covenants of the parties under
the
Letter
Agreement;
(
h
)
there being no prohibition under law against the completion of the Transaction
s
; and
(
i
)
receipt of all required regulatory, corporate and third party approvals, including approval of the TSXV
.
Upon C
losing, the directors of the Company will resign
and up
to five (5) nominees of the Vendors shall
be appointed as directors, which will include Kevin Vienneau, Nick Sta
j
duhar, Roy Bonnell, and John
Williamson, who shall also be appointed on Closing as the new President and Chief Executive Officer of
the Company
.
The Company intends to apply to the TSXV for an exemption from the sponsorship requirements under
the policies of the TSXV as a
domestic
issuer with suitable management, the Initial Technical Report, size
of the Concurrent Financing, and
a
comprehensive
disclosure document in respect of the Transaction
s
,
and will file the required filings in respect thereof
.
Under the Letter
Agreement, the parties have agreed to issue the Purchase Shares to
the Vendors
in
consideration for the
Elmtree
Gold Project and geological technical information in connection therewith
pursuant to the provisions of Section 85 of the
Income Tax Act
(Canad
a) and the Company will complete
and necessary documentation and file any forms or elections in connection therewith.
-
4
-
AC/7620060.2
The parties also agreed under the
Letter
Agreement
that during the term of the agreement
neither
the
Vendors
nor the Company
will solicit
, facilitate of encourage a shareholder proposal or takeover bid in
conflict with the
Property
Acquisition
and
the Vendors
shall for
th
with commence preparation of the
Initial
Technical Report and the Title
Confirmation
and pay all expenses required to maintain the
Elmtree
Gold Project in good standing.
The Company agreed
during the term
to conduct its business in the
ordinary course of business and not to issue and debt
or equity other than under the t
ransaction
s
contem
plated herein
, not to declare or pay dividends
or distribute any of the Company's properties or
assets, not to amend the Company's Articles or
Bylaws
in any way to adversely affect the
Property
Acquisition
, not to enter into any transaction or material con
tract not in the ordinary course of business.
Each party will be responsible for their respective costs and expenses of the
Transactio
n
s
, and the
Company will be responsible for all legal fees and disbursements related to preparation of the
documents and f
iling fees, while
the Vendors
will be responsible for the costs and expenses of
preparation of the Initial Technical Report and the Title
Confirmation
.
The parties will hold all
information received from each other in the strictest confidence, except such
information available to
the public or as required to be disclosed by law or as contemplated for the consummation of the
Property
Acquisition
.
The
Letter
Agreement will terminate, other than with respect to confidentiality and costs and expenses
of the
T
ra
nsaction
s
, upon
the earliest day on which one of the following events occurs
: (i) written
agreement of the parties; (ii)
the Closing not having occurred by
the outside
date of Closing
of
5:00 p.m.
(Vancouver time) on February 28, 2021 or such later
date as the parties may agree upon in writing; or (ii
)
if any applicable regulatory authority has notified the Company in writing that it will not permit the
Property
Acquisition
to proceed.
The parties have agreed to issue a comprehensive disclosure docum
ent and related news releases more
fully detailing the Transactions and other pertinent information as required pursuant to the policies of
the TSXV as soon as practicably possible, which shall likewise be publicly disseminated and filed under
the Company'
s profile on SEDAR.
As a separate matter from the Transaction, the Company has
also
entered into an agreement
(the
"
Termination Agreement
")
with Leede Jones Gable Inc.
("
Leede
")
dated November 1
2
, 2020 for the
termination of an agency agreement
in consider
ation for issuance to Leede of 100,000 common share
purchase warrants (the "
Termination Warrants
"), each of which will be exercisable at a price of $0.50
per common share for a period of 24 months from the date of the Termination Agreement. The
Termination
Warrants and common shares issuable upon exercise thereof will be subject to a 4 month
period resale restriction in accordance with the policies of the TSXV and applicable securities laws.
Completion of the
Transaction
s
is subject to a number of conditions, including but not limited to, TSXV
acceptance and if applicable, disinterested shareholder approval. Where applicable, the Transaction
s
cannot close until the required shareholder approval is obtained. The
re can be no
assurance that the
Transaction
s
will be complet
e
d as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular or filing
statement
to be prepared in connection with the Transaction
s
, any information releas
ed or received with
respect to the Transaction
s
may not be accurate or complete and should not be relied upon. Trading in
the securities of the Company should be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed on the merit
s of the proposed Transaction
s
and has
neither approved nor disapproved the contents of this news release.
-
5
-
AC/7620060.2
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this press
release.
Cautionary Statement Regarding Forward
-
Looking Information
This press release contains "forward
-
looking information" within the meaning of applicable Canadian
securities legislation. Forward
-
looking information includes, without limitation, statements regarding the
use of proceeds from the
Bridge Financing and Con
current Financing
,
the expected timing for completion
of the Transaction
s
and components thereof,
and the future plans or prospects of the Company.
Generally, forward
-
looking information can be identified by the use of forward
-
looking terminology such
as "
plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases
or state that certain actions, events or resul
ts "may", "could", "would", "might" or "will be taken",
"occur" or "be achieved".
Forward
-
looking statements are necessarily based upon a number of
assumptions that, while considered reasonable by management, are inherently subject to business,
market and
economic risks, uncertainties and contingencies that may cause actual results, performance
or achievements to be materially different from those expressed or implied by forward
-
looking
statements.
Although the Company has attempted to identify important fa
ctors that could cause actual
results to differ materially from those contained in forward
-
looking information, there may be other
factors that cause results not to be as anticipated, estimated or intended. There can be no assurance
that such information w
ill prove to be accurate, as actual results and future events could differ materially
from those anticipated in such statements. Accordingly, readers should not place undue reliance on
forward
-
looking information.
Other factors which could materially affec
t such forward
-
looking
information are described in the risk factors in the Company's most recent annual management's
discussion and analysis
which is
available on the Company's profile on SEDAR at
www.sedar.com
. The
Company does not undertake to update an
y forward
-
looking information, except in accordance with
applicable securities laws.
For further information:
Michael Paul Clemann
Director
Avalon Works Corp.
237 Argyle Avenue
Ottawa, Ontario
K2P 1B8
Not for distribution to U.S.
Newswire Services or for dissemination in the United States. Any failure to
comply with this restriction may constitute a violation of U.S. securities laws.